My Plan to Solve the NBA Lockout — BRI edition

Before we get into the specifics of my plan, let’s get up to date on the current state of the lockout. I wrote a two-part CBA primer in June that provides a great background on the main bargaining topics (just click Part One & Part Two).

Back in June the National Basketball Players Association (NBPA) and owners had a series of meetings to hopefully prevent the lockout before the July 1st deadline. Obviously those meeting were unproductive because we are now seven weeks into the lockout. Before the lockout began, the NBPA filed an action with the National Labor Relations Board against the NBA owners alleging the owners were failing to bargain in good faith. On August 1st, the NBPA and the owners met for a bargaining session that also did not bear fruit. Subsequently, the owners filed a declaratory action in New York district court asking the court to rule that the lockout is legal and any attempt by the players to decertify their union would void all player contracts. There are now reports that the players and owners are not planning to meet until early September.

Ok, that’s a lot of legalese. Basically, all that boils down to this: We are nowhere near a deal. I could write a whole post pinning blame on specific people, but I will save that for another day. Although the issues in this labor dispute are fairly complicated and contentious, I have devised a comprehensive plan that I believe is fair for both sides and relatively simple. The overall plan may be simple, but explaining the details in a blog post tends to become lengthy. Therefore, I am breaking it up into several parts. This post deals exclusively with the split of the Basketball Related Income (BRI).

In my opinion, this is the most important issue in the negotiations. This past season the BRI was $3.817 billion – an increase of 4.8% from the 2009-2010 season. Per the now expired CBA, the players receive 57% of that total. During pre-lockout negotiations the players offered to lower their percentage of the BRI to 54.3%, which was characterized by David Stern as a “modest” concession. In the life of a five-year deal, the players would be giving back $558 million (if the BRI increases at a pace of 4% annually). The owners claim they lost $300 million last season alone. Much has been written about how that number may or may not be precise because teams can do strange accounting tricks (which I don’t completely understand), but let’s just stick with the $300M figure. Trying to convince the owners that they did not lose the much would not be a very good negotiating strategy – especially because the owners refuse to open their books fully to the players.

The owners’ counteroffer at the last meaningful bargaining session was to give the players a flat $2 billion per season. This may sound like a pretty fair deal at first glance, but, when broken down, it is far from that. Based on last season’s BRI total, $2 billion would equal roughly 52.3% of the BRI. However, because of the expected 4% annual growth of the BRI, the players would essentially have their salaries frozen. By the fifth year of the new CBA (2015-16) the players would only be receiving 43% BRI total. Further, the owners are pushing for a 10-year CBA, so the players’ BRI percentage would continue to decrease throughout the deal.

The following is my plan to solve the BRI issue. My ideas were influenced by Ken Berger’s plan that he wrote for CBSSports.com. It is his basic structure off which mine is based, but with some stark distinctions. The baseline number on which the figures are based is $3.817 billion (last year’s BRI total).

The Hines Plan

Players

Owners

Year 1:

50% of the BRI total up to $3.817 billion

50% of the BRI total up to $3.817 billion
100% of any growth above $3.817 billion

Year 2:

50% of the BRI total up to $3.817 billion
25% of any growth above $3.817 billion

50% of the BRI total up to $3.817 billion
75% of any growth above $3.817 billion

Year 3:

50% of the entire BRI total

50% of the entire BRI total

Year 4:

51% of the entire BRI total

49% of the entire BRI total
All the revenue growth above 4 percent

Year 5:

52% of the entire BRI total

48% of the entire BRI total
All the revenue growth above 4 percent

Essentially what my structure does is help the owners recover their stated loses quickly by freezing player salaries at the front end of the deal. In return, the players’ BRI share will increase more rapidly at the back end of the deal, while the owners’ share will increase less rapidly. If the players were to propose this to the owners, I find it difficult to believe the owners would not agree to it. The BRI split is the issue on which players need to make a grand concession because the issues of guaranteed contracts and a hard cap are much more important to the players and, therefore, less likely to budge.

Based on my plan, the players would receive $1.9 billion the first year. Last season the players received a total of $2.17 billion. Therefore, in the first year alone the players would be conceding $270 million to the owners, which would take care of nearly all their stated losses from last year. Plus, the owners would be receiving all of the expected growth. Using a conservative 4% estimate, the owners would get an additional $150 million free and clear from the players. Year two would be even better for the owners. Players’ salaries would still be frozen, so $270 million will go directly to the owners’ pockets. Further, the owners would get 75% of the growth, which would total approximately $230 million.

In the first two years of my plan the owners would receive approximately $920 million more than under the now-expired CBA. That is nearly one billion dollars in two years. That should be more than enough money to cover any losses the owners have suffered. The players would agree to this because the back end of the deal is much more player friendly.

The salary freeze will end in the third year of the deal. The players will receive a straight 50/50 split of the BRI total – growth and all. The player’s portion of the BRI will have increased by over $200 million from the second year of the deal – from $1.9 billion to $2.14 billion – because of the growth that occurred during the previous two years. This will be the year that the players’ portion of the BRI reaches pre-lockout levels (the players’ portion in the 2010-11 season was $2.17 billion; in year three their share will be approximately $2.14 billion). The owners’ share, on the other hand, will not increase in third year of the plan. The players might not be thrilled about rolling back salaries the first two years, but when the third year of my plan rolls around, the players will be much happier.

In the fourth year, the players’ share of the BRI increases to 51%. That nets the players $130 million more than the year before, which triples the owners’ increase. By the fourth year, the players have already well exceeded their pre-lockout share of the BRI total with one more year left in the deal. If the league experiences better than 4% growth, the owners will increase their BRI takeaway. By giving the owners all of the revenue growth over 4%, their BRI share increase depends largely on the owners’ efforts to improve the league. I think this is a positive way to place the burden on the league owners to trim non-player costs (like, say, the WNBA or over-the-top All Star Game concerts) and creatively increase revenues. However, any increase in the owners’ share will be marginal in the final three years of the deal because the players made such generous concession at the front end of the deal.

In the fifth and final year, the players will receive 52% of the BRI total. Again, the owners’ BRI increase will be marginal while the players’ share will increase by another $130 million. The players will also have claim to 52% of the BRI when it is time to negotiate a new CBA in 2016, which will be a much stronger position than the 50% they had at the beginning of the deal.

I have provided a chart the breaks down the players’ BRI share in four different scenarios.

Players’ Share under Different Proposals

Owners’ Proposal*

(flat amount)

The Hines Plan*

(described above)

Players’ Proposal*

(54.3% of BRI)

Expired CBA*

(57%of BRI)

2011-12 Season

$2 Billion

$1.9 Billion

$2.16 Billion

$2.26 Billion

2012-13 Season

$2 Billion

$1.99 Billion

$2.24 Billion

$2.35 Billion

2013-14 Season

$2 Billion

$2.14 Billion

$2.33 Billion

$2.45 Billion

2014-15 Season

$2 Billion

$2.27 Billion

$2.42 Billion

$2.54 Billion

2015-16 Season

$2 Billion

$2.41 Billion

$2.52 Billion

$2.64 Billion

* assumes revenue growth of 4% annually

As you can tell by the chart, the players’ BRI share under my plan closely mirrors those under the owners’ proposal during the first three years of the deal. However, the players’ shares increase more rapidly during the final two years of my plan – nearly on pace with the figures from the players’ current proposal. That is why I believe my plan is a fair compromise for the two sides. If my plan was adopted, the players would undoubtedly be making a huge concession. However, the players should not make such a concession without something in return. That is where the other contentious issues come into play. The players should make a generous BRI offer to the owners in order to get the them to budge on their hard-line position of imposing a hard cap and eliminating guaranteed contracts.

2 responses to “My Plan to Solve the NBA Lockout — BRI edition”

Per wiki answers, there are 438 players in the NBA. Equally distributed, 2 billion dollars gives each player just over 4.5 million dollars. Considering what the players would be earning in any other profession, and that the payment is in addition to their contracted salaries – that’s fair.

The owners have several hundred million dollars invested in the franchises and own all the risk. Why shouldn’t they get a larger percentage of the revenues? Their proposal looks very fair to me.

The players should understand their risk in this and realize that the same thing could happen to them as happened to the NHL players a few years ago.

My advice to the players: SIGN THE DEAL IN FRONT OF YOU AND GET INTO THE GYM!

The percentage of the BRI that the players receive is not in addition to their contracted salaries. It is the money from which their salaries are funded. By limiting the players’ BRI share to $2 billion for 10 years, the players would have an artificial cap on the amount of money they could make, regardless of what the market bears.

I agree with you that the owners have a lot invested in these franchises and the players would not have a league in which to play without the owners. However, the owners would have a hard time filling the gym every night without the best players in the world playing in them on a nightly basis.

What I’m saying is the owners and players are in business together. They should both make shared sacrifices to benefit the the league as a whole. That is what my plan aims to accomplish. Both sides would be sacrificing something for the good of the entire league.

With the owners’ proposal, the owners would profit from all the future growth, even though the players are just as responsible for the growth as are the owners. To me, that is not a fair deal. Both sides should be able to profit from the continued popularity of the league.